TORONTO — Canada's main stock index was dragged down Tuesday by commodities and the health care sector while heavyweight financials got a lift from a signal that a ban on dividend hikes and share buybacks may soon end.
Meanwhile, U.S. stock markets continued record runs ahead of a key announcement by the Federal Reserve.
Craig Jerusalim, portfolio manager at CIBC Asset Management, says equities are in the midst of a "tug of war" between very strong earnings results and the negative of central banks withdrawing monetary stimulus and potentially hiking interest rates.
"Right now equity in the States is ignoring the negatives and focusing on the positives and in Canada I think it just has to do with the mix of a larger energy sector and a larger material sector that's pulling back a little bit more today," he said in an interview.
Meanwhile the financials sector was one of four sectors to post gains as observers dissected an invitation from the Office of the Superintendent of Financial Institutions for a Thursday announcement.
The federal regulator of financial institutions said it would make an announcement on capital distributions.
"People are clearly speculating that we might get a relaxing of the dividend and buyback moratorium for the banks and insurance companies," said Jerusalim.
The S&P/TSX composite index closed down 77 points to 21,170.01.
In New York, the Dow Jones industrial average was up 138.79 points at 36,052.63. The S&P 500 index was up 16.98 points at 4,630.65, while the Nasdaq composite was up 53.68 points at 15,649.60.
Markets moved Tuesday largely on company-specific news coming out of quarterly earnings results that have generally beat expectations.
But those companies that have missed have really suffered the consequences, said Jerusalim.
"Valuations aren't exactly cheap for the market as a whole, so there is that expectation that companies need to continue to exceed expectations and or raise guidance for the strong equity performance to continue."
Industrials got a lift as Air Canada's shares climbed 4.4 per cent after it posted solid quarterly results with a return to positive cash flow on strong cargo and a pick up in international travel.
Health care was the biggest laggard. It fell 3.5 per cent as Quebec-based pharmaceutical company Bausch Health Companies disappointed analysts by missing forecasts and its shares plunged 9.3 per cent.
Materials was down 1.4 per cent on lower metals prices and fertilizer provider Nutrien Ltd. decreasing five per cent despite beating forecasts and raising its guidance.
The December gold contract was down US$6.40 at US$1,789.40 an ounce and the December copper contract was down 2.75 cents at nearly US$4.37 a pound.
Energy fell nearly 1.6 per cent on slightly weaker crude oil prices ahead of this week's OPEC meeting where the cartel is expected to increase output even though it has missed recent targets.
Suncor Energy Inc. led Canadian producers lower, losing 3.3 per cent, followed by Crescent Point Energy Corp. down 2.7 per cent.
The December crude oil contract was down 14 cents at US$83.91 per barrel and the December natural gas contract was up 35.6 cents at US$5.64 per mmBTU.
Jerusalim said it is hypocritical for the world to beg OPEC to pump more oil to keep a lid on gasoline prices at the same time leaders are at the UN climate conference in Glasgow discussing global warming.
"Clearly the irony and the hypocrisy is rampant in that environment."
The Canadian dollar traded for 80.62 cents US compared with 80.85 cents US on Monday.
The U.S. dollar got a lift ahead of Wednesday's announcement by the Fed where it is expected to taper bond buying and possibly signal when interest rates will rise next year.
This report by The Canadian Press was first published Nov. 2, 2021.
Companies in this story: (TSX:SU, TSX:CPG, TSX:AC, TSX:NTR, TSX:BHC, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press